Deciding to Buy
One of the biggest financial decisions that you will probably ever make in your life will be purchasing real estate. So, weather you are a first time buyer or have bought and sold property before, it’s important that you prepare accordingly and make fully informed carefully considered decisions.
- Tired of paying rent?
- Outgrown your current home?
- Investment property?
- Need to accomodate aging parents?
Knowing what motivates you to buy will help you to focus and select the property that’s right for you.
Owning property is one of the best investments you can make. However, before you start your search it’s important to do some preparation.
Build a Financial File
You will want to keep a file of all your important financial documents. Things you typically find in a financial file are:
- Financial statements
- Recent pay stubs
- Auto loans
- Bank accounts
- Tax returns (two years)
- Credit card statements
- Copies of leases for any investment properties
- 401 K statements, stocks, bonds, life insurance and mutual accounts
- Divorce decrees
8 Things Not To Do!
- Don’t buy or lease an auto
- Don’t move assets from one bank account to another
- Don’t change jobs
- Don’t buy new furniture or major appliances for your “New Home”
- Don’t use your credit cards unnecessarily
- Don’t ignore who runs your credit report
- Don’t attempt to consolidate bills before speaking with your lender
- Don’t pack or ship information needed for the loan application
What It Is
- A letter from a lender stating that a home shopper qualifies for a certain loan amount.
What It Is Not
- A guarantee the mortgage will be approved once all other information is collected and approved.
- A commitment to lock a rate or loan type.
- FYI: Most preapproval letters are valid for 90 days.
- Negotiating Power
- Determines Price Range
- Smoother Transaction
- As soon as you’re considering buying. Preparation is key!
- Meet with your loan officer
- Provide information requested
- Authorize a credit report to determine your credit score
Buying or selling a home are big steps in your life. Each step requires many steps of their own. Making a wrong decision can impact the entire process. Whether you are stepping out of-or into-a home, having a real estate professional at your side as your guide can help ensure that you don’t veer off the path. They will help to overcome any obstacles in your way.
Here’s a list of some of the things you should look for when selecting a real estate professional to work with:
- Ask about their credentials and education. Make sure they are a member of the National Association of REALTORS®. Member professionals represent the highest levels of training, knowledge and ethics.
- Interview several agents , make sure they are knowledgeable about the areas you are interested in.
- Ask for references and read reviews and testimonials written by past clients.
- What are the agents working hours and availability?
- Does the agent have good listening skills?
- Does the agent respond in a timely manner?
Launching Your New Home Search
Now that you have completed the necessary steps to embark on your new home search. It’s time to find the right property for you.
Explore Your Neighborhoods
Get out and spend sometime in the areas you are interested in. Drive the areas at different times of the day. Talk to some of the people you meet who live in the area. Start getting a feel for what it would be like to live there.
Target Properties of Interest
Start a list of the properties that interest you the most. Get in touch with your real estate agent and start the process of setting up appointments to tour those properties. Chances are your agent will have a few in mind for you as well.
Making An Offer, Time To Buy!
Now that you’ve found a property that you are interested in buying, your real estate agent can help you put together an offer that will be appealing to the seller. A real estate professional will research all the potential costs and expenses you will need to know about for a successful and informed transaction. They will guide you through the process and help you to position yourself so that you have the advantage over other competing offers.
Under Contract: What Happens Now?
There are a number of things that will take place at this point in your home buying process.
At this time you have entered into a legal arrangement between “you” the buyer and “them” the seller for the purchase of the property. Here are two very important things to keep in mind:
- Keep written records! It’s not unusual to have several counter-offers and addendum associated with real estate transactions. Again, this where your real estate professional can be a big help to you. They will help you with all necessary paperwork and make sure you have copies of all of your documents.
- Stay on schedule. By staying on schedule you will be ensuring a smoother flow to the transaction. No one wants to delay the closing or possibly breach the agreement. Your real estate professional will be with you every step of the way, keeping you informed and on track.
Important Players In The Home Buying Process
The Closing Agent
This step will be handled by a title company or an attorney. The job of the closing agent is to hold the deposit in escrow and do a complete recorded history of the property. This is to insure that the title to the property is free and clear of any encumbrances by the closing date and any new encumbrances are properly added to the title. Properties can sometimes be subject to subdivision restrictions. Also, there can be recorded easements or encroachments that can limit your rights the use of the property.
There are different ways of holding title to a property and each have different legal, tax and estate implications. It may be wise to consult with an attorney or tax professional who specialize in these matters. If you are not sure ask your real estate professional for some recommendations of skilled professional to consult with.
You will need to have a licensed property inspector do a through inspection of the property. This step happens once your offer has been accepted by the seller. Again, it’s important to stick to the schedule and get all inspections done on time. Some inspectors specialize in certain areas and can be hired to do a deeper dive on the property if necessary. NOTE: for commercial properties you will be required by the lender to have an environmental audit done on the site.
Two Possible Outcomes To Inspections:
- The property passes with flying colors and there are no contingencies to address.
- The inspections uncover needed repairs or defects that need to be addressed. The buyer can request to renegotiate the terms of the contract and ask for concessions from the seller.
Appraisers and Lenders
It is extremely important to keep in touch with your lender. Your lender will request certain documentation from you that will be used in the approval process and ultimately the funding of your loan. If your loan is conditional based on financing, then the bank will have the property appraised by a licensed appraiser. This will provide the lender with a value for the property. The lender does this to confirm the value of the property and their investment in it is accurate. Appraisers are licensed professionals who aid in determining the value of properties. They use a combination of square footage, recent sales of similar properties, building costs and if applicable operating income to determine the value.
Home Owners Associations
Some neighborhoods have associations. If you are buying a home in an area that has an association you will need to find out if approval is required for the sale. Also, you need to request a copy of the rules, regulations and other important documents from the seller as soon as possible. Make sure that all paperwork and fees are completed and turned in on time. Some associations require a certificate of approval before you can move in. If so the closing agent will request that an original copy of the approval letter be brought to the closing. It will need to be recorded along with the deed in the county public records.
You will be required by your lender to purchase property insurance if you have taken out a loan to buy your home. How much you will need to purchase depends on your lender and the value of the home. It’s a good idea to shop around when getting quotes for coverage. Here are a few options to consider that could save you money:
- Ask about discounts. You might be able to get a lower premium if your home has safety features such as; storm shutters, security alarm system and smoke detectors to name a few. Also, if you are over the age of 55 you may be eligible for additional discounts.
- Higher Deductibles. This one area can save you hundreds of dollars annually.
- What to Insure. Please remember to insure your HOUSE only! Do not insure the LAND that it sits upon. Avoiding this mistake will save you money.
If you do not have an insurance agent ask your real estate agent for several companies to contact for quotes.
Closing and Moving In
At this point in the process you are in the home stretch. Only a few more things need to be done before you can proceed with moving in.
Final Inspection and Walkthrough
Prior to closing on the property you will visit the home with your real estate agent. This usually happens the day before closing or the day of. The purpose is to do a final review of the premises to insure that repairs have been completed, everything is in working order, the property is in good condition and that any items that were to be removed have been removed. Also, any items that were to come with the home for example, washer and dryer or refrigerator are there.
Your real estate agent will be able to provide you with contact information for the local utilities and services for your area to contact after the closing takes place.
Planning For The Unexpected
We all want things to go smoothly. Unfortunately, sometimes there are unforeseen “issues” that can happen. That’s where having your real estate agent at your side really pays off. We have no doubt had to handle unforeseen “issues” before and have the skill, experience and resources to effectively and efficiently get you through anything that may arise.
Your closing agent will provide everyone with a settlement statement. This is a summary of the financial transaction taking place for this property. The summary will be reviewed by all parties then signed by the closing agent , buyer and the seller. If you have financed your new home than you will also sign all the documentation that the lender requires too. If you are using cash as part of the transaction than you can either bring a certified check to the closing or make arrangements for a wire transfer of funds to a designated bank account. Have your real estate agent follow up with the sellers agent to make sure all keys, garage door openers etc… are brought to the closing. If you are unable to attend the closing as scheduled you can sign early however, it’s extremely important to make these arrangements well in advance.
Congratulations on your new home!